Google may have only received a tap on the wrist from the Federal Trade Commission when the agency closed the U.S. antitrust investigation without taking action against the Internet giant for skewing search results to favor its services, but it’s looking increasingly likely that Google will face strong action on the other side of the Atlantic.

The Financial Times reports that Google will have to change the way it presents search results or face antitrust charges for “diverting traffic.” Competition Commissioner Joaquin Almunia told the newspaper:

“We are still investigating, but my conviction is [Google] are diverting traffic. They are monetizing this kind of business, the strong position they have in the general search market and this is not only a dominant position, I think – I fear – there is an abuse of this dominant position.”

Almunia has told Google that it must make changes to address European concerns or that it will face a formal statement of objections.  Late last year he warned that Google would have to offer remedies this month.

I think you can take Almunia’s strong statements Thursday to The Financial Times as a sign that the European Commission is serious.  While he says he’d prefer a settlement, European law gives the antitrust enforcer a huge stick.  After filing a formal statement of objections, the Commission  can impose a fine amounting to 10 percent of Google’s revenue or about $4 billion. That’s almost as effective to getting executives attention as sending them to the slammer. Unlike the FTC, the European Commission doesn’t have to make its case in Court.  It can simply impose the fine.

As The Financial Times headline read on one story about the situation, “EU Antitrust Chief Holds All the Aces.” Almunia hinted that the antitrust settlement may play out differently in Europe because the law is different.  It’s also true that the Internet giant’s dominance in search is even greater in Europe at 90 percent of the market than the 70 percent share it commands in the United States.

And there is still a strong possibility of meaningful action in the United States.  Texas Attorney General Greg Abbott is actively pursing a case.  His staff has appropriately worked to obtain key Google documents that Google tried to claim were privileged and did not need to be turned over in response to Civil Investigative Demands. From all appearances the FTC staff was nowhere near as diligent in its investigation.

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Posted by John M. Simpson. John is a leading voice on technological privacy and stem cell research issues. His investigations this year of Google’s online privacy practices and book publishing agreements triggered intense media scrutiny and federal interest in the online giant’s business practices. His critique of patents on human embryonic stem cells has been key to expanding the ability of American scientists to conduct stem cell research. He has ensured that California’s taxpayer-funded stem cell research will lead to broadly accessible and affordable medicine and not just government-subsidized profiteering. Prior to joining Consumer Watchdog in 2005, he was executive editor of Tribune Media Services International, a syndication company. Before that, he was deputy editor of USA Today and editor of its international edition. Simpson taught journalism a Dublin City University in Ireland, and consulted for The Irish Times and The Gleaner in Jamaica. He served as president of the World Editors Forum. He holds a B.A. in philosophy from Harpur College of SUNY Binghamton and was a Gannett Fellow at the Center for Asian and Pacific Studies at the University of Hawaii. He has an M.A. in Communication Management from USC’s Annenberg School for Communication.

Department of Justice, State Attorneys General Must Press To End Search Bias

The Federal Trade Commission’s settlement with Google fails to end its most anticompetitive practice, Consumer Watchdog said today and the public interest group called on the Department of Justice and state attorneys general to press forward to end the Internet giant’s monopolistic behavior in search results.

“Google clearly skews search results to favor its own products and services while portraying the results as unbiased. That undermines competition and hurts consumers,” said John M. Simpson, director of the group’s Privacy Project. “The FTC rolled over for Google.  They’ve accepted Google executives’ promises that they will change two practices without even requiring a consent agreement, but Google has a track record of broken promises.  Don’t forget, this fall the FTC fined Google $22.5 million for violating its most recent consent agreement. Why would the FTC take Google at its word?”

The new Assistant Attorney General for the Department of Justice Antitrust Division, William J. Baer, should make Google’s abuse of search a top priority, Consumer Watchdog said.

The FTC’s settlement does require a consent agreement regarding so-called Standards Essential Patents held by Google’s Motorola subsidiary.  Google is now required to license these patents to any company on “fair, reasonable and non-discriminatory” terms – known as FRAND terms.

“This will help ensure competition in the manufacture of smartphones and tablets,” said Simpson, “but that was never the heart of the issue. Biased search and Google’s favoring its own properties do real consumer harm. Google is the gateway to the Internet for most people. When Google rigs the game, we all suffer. They need to be stopped.”

Consumer Watchdog expressed concern that FTC Chairman Jon Leibowitz, who is expected to step down from the commission soon, may have rushed to finish the investigation so it could be concluded under his chairmanship.

The nonpartisan, nonprofit public interest group noted that Google’s monopolistic business practices are under investigation by a number of state attorneys general including Texas, California, New York and Ohio. European Union competition officials are also investigating Google.

When you stare down a $220 billion corporation, it’s hard not to blink. But if the Federal Trade Commission doesn’t deliver on its ultimatum to Google that it settle its antitrust problems soon for real relief or face prosecution, then consumers will never get the open and unfettered online and mobile access to information they deserve.

While the government’s battle with Microsoft in the 1990s was about whether the dominant software company could bundle software and an Internet browser, the antitrust case against Google is about whether one company should have so much control over online information that it can steer us any where it chooses for its own profit.

This is the power to make or break businesses, control online discourse, and steer consumers to the Internet giant’s own websites and affiliated businesses, all based on tweaking an unseen algorithm and holding a network of key online and mobile gateways and properties.

Google’s 70% control of online searches and 90% control of mobile searches, along with its dominant Android mobile operating system, patents, and vast content acquisitions make it the Standard Oil of our time.

The allegations against Google are that it restrains online trade with biased search results that drive consumers to the content it owns (Google Travel, Products, YouTube, Maps, Google+, etc.) or content it chooses, as opposed to that favored organically by the public.

Restraint of trade may be different today than in 1911 when the U.S. Supreme Court ordered John Rockefeller’s Standard Oil broken into parts under the Sherman Antitrust Act. Nonetheless the antitrust principle of preventing dominant players from playing unfairly and hurting consumers by driving out legitimate competition is very real for Google’s 2012 business model.

The principle at stake in the FTC case is critical: If you want to do business online, should you be forced to do business with Google?

Companies like Foundem, Nextag, AsktheBuilder.com and Kayak have been threatened with closing because they have fallen on the wrong side of the assumptions in Google’s Search algorithm. The evidence shows that Google increasingly steers consumers to what it determines to be “quality” web sites – aka those that use Google services and support its business model. If you are not on Page One of a Google Search, your business is not alive, even though you may be the business that consumers prefer in the market, just not Google’s “type” of business.

Counterfeit industries and black markets for prescription drugs, predatory loans and entertainment have also profited because Google has turned a blind eye to the source of its massive advertising dollars and, as a result, companies that play by the rules have been hurt. Example: Google paid the US $500 million last year for illegal pharmacy advertising. Copyright and other intellectual property rights held by authors, artists, musicians, journalists and Hollywood are also increasingly thrown to the wind because of Google’s dominance, bias against respecting them and the money to be made from “free” content and pirated products.

Can such a dominant search and content Goliath really provide open access that isn’t biased toward its ownership interests?

Google founders Larry Page and Sergey Brin didn’t think so when they went to Stanford.

“We expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers,” they wrote in Appendix A of their research paper explaining their search technique. “Since it is very difficult even for experts to evaluate search engines, search engine bias is particularly insidious.”

Consumers often don’t know that they are being steered or why, so it takes an engineer to show them. Recently engineers from Twitter, MySpace and Facebook showed that Google’s new social search feature steers users to less relevant and less popular spots, like Google+, to promote Google services, rather than Twitter and other spots with unquestionably more traffic. Google increasingly wants our world to be its world.

The young Google founders argued in their Stanford research paper that launched Google that overt bias won’t be tolerated, but covert steering would be acceptable. “For example, a search engine could add a small factor to search results from friendly companies, and subtract a factor from results from competitors,” they wrote. ” This type of bias is very difficult to detect but could still have a significant effect on the market.”

And this is the most dangerous type of bias in the hands of company as big and controlling as Google.

The European Commission is demanding the Internet giant change its ways or face a formal complaint. The Federal Trade Commission, rumored to be backing away from a staff recommendation in favor of legal action, owes the public a prosecution of Google in order to reveal the evidence it has collected. Help us keep the FTC off the fence – send an email to the Commission today to tell them to file the antitrust lawsuit today!

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Originally posted on November 30th, 2012 on the Hill. Posted by Jamie Court, author of The Progressive’s Guide to Raising Hell and President of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.